Interview Peter Koopmans
'Heterogeneity challenge for milk price'
A cooperative exists by the grace of its members, but what if those members no longer feel at home? Milcobel is strongly committed to member involvement. Peter Koopmans, the new CEO, about heterogeneity, niches and the milk price. The motto for everything: 'by Our Farmers, for Our Farmers'.
circuit assemblies. They are currently in full swing at Milcobel, the largest dairy cooperative in Belgium. It is for the members of the cooperative a first acquaintance with Peter Koopmans in his new position as CEO. "It is rewarding work to explain what we do and it is positive to get our people on board."
Of anything and everything
Koopmans is relatively new to the dairy sector; for example, he has only been active at the largest cooperative in Belgium since 2014. It means that he stepped in just before the abolition of the milk quota. What he then encountered were factories that were nowhere near using the potential that was there. The company was also involved in all sorts of things. "The baking mixes and all the other side issues are now gone."
Optimizing factories is a specialty of the CEO. The agricultural sector is not new either; he worked for Tiense Suiker until 2014, so he is familiar with sugar processing. Behind the scenes, the last 4 years (and still) have been hard work to make the processes to improve and get more out of the factories and the market. "The barn is starting to get in order. That brings a little more peace of mind and gives time to return to the farmers, because in the end everything is done for the approximately 2.700 members."
take away anger
Something often discussed during assemblies is the pricing of milk. It is therefore carefully considered what the other processors pay. "The milk prices of Arla, DMK and FrieslandCampina have shown a strange movement; for example, prices remained high in the last quarter of 2017, while the value of milk declined. We pay out what comes in and thus respond more quickly. When we explain that, our members understand that," says Koopmans.
At Milcobel it is therefore all about the members; much more than in the past. "We are big in Belgium, but small in Europe. In the past we sometimes wanted to be arrogant, but we must not forget that first and foremost we have to value the milk of our members."
In order to create a long-term perspective, a sharp focus was chosen. "We choose our battle; name the factory in Moorslede, for example. We are good at quality cheeses, but in terms of scale and efficiency we cannot compete with the large-scale, 'low-cost production' of FrieslandCampina and A-ware. choose for the small-scale production of quality cheese; this is a production where there is still a lot of growth potential within the European borders and for which we do not have to go to Asia.We have also consciously made the choice for 100% fresh cow mozzarella with specific functionalities in mozzarella thus stepped into a growing niche."
All parts of the company were closely examined, which led to the decision being made in milk powder to also enter a niche and say goodbye to the large-scale bulk product. "By that we mean the higher segment powder, which we call POW(d)ER+. We focus on what we are good at. Our powder tower is relatively small, but can produce high quality powder (under very hygienic and tightly controlled conditions). So we are not going for the large-scale, 'low-cost model'." Koopmans states that you should think carefully about your position within the game.
Room for new members
The optimization of the factories has resulted in Milcobel being able to process 1,8 billion liters of milk (annual basis). 1,5 billion liters of this milk pool comes from the members. There is also room for new members' milk. "We do not require grazing to be applied, but there are a few criteria that must be met. For example, we look at quality history, sustainability and they should certainly not be shoppers (i.e. dairy farmers who come and go). We have here (just like in the Netherlands) we also have to deal with older company heads. Potential quitters without a successor cannot come to us."
Many dairy farmers (because of age) are leaving the sector, but at the same time the farms of those dairy farmers have grown. The combination of higher production per cow and extensions results in a net increase of 4% per year. The average milk supply is approximately 556.000 liters of milk per company, per year. This was approximately 2016 liters of milk in 2017 and 503.000.
In Belgium, dairy farming is at least so diverse as in the Netherlands. "You have to find a balance in that heterogeneity. There is room for everyone, but everyone has their place within the company. It is not an easy task, but you have to respect that every company has its own history, vision and plans. We respect this and a conscious decision was made not to create special milk prices. The money paid for grazing is only a compensation for the costs. Why shouldn't heterogeneity be an asset if we can fit everything neatly together?"
More knowledge about the cooperative
The involvement of the members and support for what is happening are 2 things that are considered important. The cooperative decisions and strategic choices go through the members, making sure that everyone understands. This state of affairs also increases the level of knowledge about the company among the members.
"We go quite far in this; for example, young board members are given a course in 'balance reading'. It also makes them more critical, but we do not shy away from that. It is about making them proud of the company. markets, and what that means for the milk price in Europe and, of course, ours. Our farmers want and need to understand this in order to work out their future plans in this way."
Growing companies and young people, the cooperative is careful with that. For example, it was recently decided to convert the volume surcharge into a surcharge for fat and protein, but more changed. "Young partners can, for example, be granted a two-year extension to build up their member capital. There is also a more favorable arrangement for growers, because they often need a lot of capital for their own company in the beginning."
More is demanded of dairy farmers as a result of the free market, but also from an environmental perspective. "In my opinion, the focus is too much on planet, while sustainability is about 3 things: the 3 p's (planet, people and profit). It is our job to explain this well on the one hand and to deal with it well on the other. Moving and shifting problems is not a solution. For example, by targeting CO2 (livestock density) in New Zealand, the problem is moved to another continent, because the need for food and production remains."
Brussels and a cash planning
The demands placed on dairy farmers coincide with large fluctuations in the milk price. Koopmans does see a role for Brussels in this. "Although the intervention scheme for skimmed milk powder was necessary in 2016 and was able to lay a good foundation in the market, it did not do its job well in 2017: setting up an intervention when there is a high milk value in the powder-butter complex is not for repeatable!"
"There remains a European responsibility to be ready for our agriculture, because you never know what will come. After all, the European Union is already dependent on other countries for many things, which can increase its vulnerability. It is not good to go too far to go into liberal thinking and market correction in case of emergency must remain possible: a maximum stock on the one hand and only allow intervention in case of poor milk value on the other."
The farmer also has to do a lot himself. "Through cash planning, but also by creating your own buffer. There will be good and less good years. You can already see 2 groups. One makes a schedule and the other undergoes everything. At the cooperative, risk management is still part of the "The role of the processor is mainly to make the dairy farmer aware of the new environment in which he operates."
The challenges in dairy farming are great and will continue to be great. Milcobel has laid the foundation internally and in 2018 and 2019 the cooperative will continue to pursue the strategy that has been deployed and this will have to prove itself.
Herman van den Pol
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.